Nestle Porter’s Five Forces

Analysis
GROUP NO -- 6
Porter’s Five Forces

 Competitive rivalry or competition (Strong Force)

 Bargaining power of buyers or customers (Moderate Force)
 Bargaining power of suppliers (Weak Force)
 Threat of substitutes or substitution (Moderate Force)
 Threat of new entrants or new entry (Weak Force)
BARGAINING POWER OF SUPPLIERS

 An analysis of the bargaining power of suppliers will identify the changing price, quality and
service of suppliers without consequence. Supplier power can be different due to seasonal or
economic cycles. Supplier power is increasing as many of the food processing companies are
not producing their own raw materials.
 Nestlé itself gets material in the form of raw or semi-processed directly from farmers and
trade channels.
 By considering the number of suppliers in the industry and the switching cost, the
dependency to a particular supplier can be reduced. Nestlé has operations in many countries
throughout the world, if one supplier unable to offer good price for Nestlé, it can switch to
other suppliers.
 The bargaining power of supplier depends heavily on the strength of the company’s brand.
Big companies such as Nestlé can take advantage in bargaining.
BARGAINING POWER OF
CUSTOMERS

 Food processing industry is very broad and rivals can come out with numerous product
selections. When the companies step into the maturity stage, they will have even more
products provided to strengthen the company’s brand.
 Nestlé Milo has strong market share and remains a constant favourite amongst Malaysia
consumers. In order to further strengthening the brands image, the company added Milo
Gold to its product range to keep the consumers loyalty towards the product.
THREAT OF SUBSTITUTE GOODS

 An analysis of the threat of substitute products will identify the consumers of a company
might switch their purchasing alternative. There is a tendency for food and beverages
manufacturers to produce broad range of products. These products may compete with one
another to gain market share and become substitute for each other.
 Nestlé Koko Krunch Cereal can be the substitute for Nestlé Nesvita cereal drink since
both of them are intended for breakfast consumption.
 Nestlé is not offering all kinds of food and beverages, those unoffered kinds may act as
the substitutes for the Nestlé’s products. For example, Nestlé has coffee in its product
lines which is Nescafé, the substitute for it can be the soft drinks which are not in the
portfolio of Nestlé. In this case the substitutes are very broad.
THREAT OF NEW ENTRANTS

 An analysis of the threat of new entrants will identify entry barriers within an industry.
Industries with high barriers to entry will face low risk from new competitors than an
industries with low barriers to entry.
 The competition of ice cream business in Pakistan is very small. This could create
chances for other international ice cream brand to penetrate their products to compete
with Nestlé in Pakistan. The major substitutes of Nestlé’s ice cream would be Walls ice
cream and Hico ice cream.
COMPETITIVE RIVALRY WITHIN THE
INDUSTRY

 Rivalry among competing firms is the utmost of the five competitive forces. Firms within
the same industry are competing with one another to gain customer share to increase
profitability. The competitors are of roughly equal size which can make the competition
even stiffer. They will attempt to gain dominance over another.
 Nestlé and General Mills have joint ventured for breakfast cereal market. By having such
joint venture these two companies can achieve better success instead of competing with
each other.
Value Chain Analysis

 Value chain analysis is a development for understanding the general factors and
conditions under which a value chain and its firms can ac

Nestlé’s employees
 The company determined by skilled and motivated workforce for continued success
 Nestlé includes many nationalities, religions, and ethnic groups working together in one
single unifying corporate culture.hieve higher levels of performance.
Farmers and Agriculture

• Nestlé always assist farmers to be successful suppliers.

• This great effort is helping the entire region to develop a positive long-term impact to boost
economic performance.
• Nestlé share good environmental and water management practices with farmers by carrying out
agricultural programs.
• Nestlé insist code of ethics to maintain good and long-term relationship with their suppliers.

Products and consumers

• Nestlé strengthens its brands and customers’ loyalty to respond to consumers changing
preferences.
• Nestlé preserves the nutritious in its products while enhancing the flavour and improve the
quality of their products.
• According to Julio Frenk, former Secretary of Health Mexico, from his experience in Mexico,
he believes that Nestlé is delivering genuine shared value through its products in the society.
Benchmarking

 A company should has its benchmark to improve quality of its products.

 In June 4, 2009, Nestlé started make use of ASSET4 to benchmark its environmental,
social and governance (ESG) performance.
 ASSET4 is the top supplier of idea, comparable, and auditable extra-financial
information.
 According to Nestlé’s head of Investor Relations, Roddy Child-Villiers said that Nestlé is
committed to improve its ESG performance via Creating Shared Value, which build
continuous business triumph and the establishment of shareholder value to the creation of
value for society at large.
THANK YOU